Xu Zhijun, chief marketing officer at Huawei Technologies, told the Financial Times that the concerns expressed by some US lawmakers were “bullshit”…The deal has sparked concerns in the US because 3Com supplies intrusion prevention technology to the US defence department, designed to protect the Pentagon against cyber attack. The Pentagon believes that hackers in China conducted a massive cyber attack on its systems last year..Thaddeus McCotter, House of Representatives…..describing the existing buy-out proposal as a “stealth assault on America’s national security”…Asked about the concerns that the deal could endanger US national security, Mr Xu said through an interpreter: “That would be bullshit.”… Pressed to clarify his remarks further, Mr Xu added: “Because we only just take 16.5 per cent.”…The People’s Liberation Army (PLA) is one of Huawei’s customers, and Mr Xu confirmed that Ren Zhengfei, Huawei’s founder and chief executive, was a former PLA officer.

Analyst Note: The Huawei C-Suite “bullshit” comment can be argued as a defacto proxy for the general attitude (and lack of respect) of the Chinese toward the U.S., its protocols and its national security integrity. Also, the PLA is responsible for not only all military and intelligence operations in the PRC, but also espionage as well.  

Sidebar Note: Unrelated to the specific 3Com deal but related in the broader Commulism context, just as Huawei as noted above has strong ties to the government and PLA, of particular note is the CEO being a former PLA officer. Interestingly then, Russian President (soon to be Prime Minister) Vladmir Putin is a former senior KGB officer/agent. Clearly then, both Russia and China leadership whether government, corporate or both (government ownership and/or connection to companies) sectors dovetail into the intelligence/espionage arena and this should be promptly flagged for growing concern.

Analyst Assessment:

Huawei has three objectives with its 3Com efforts - one strategic, the other two tactical.

Strategically, the Chinese government vis-à-vis Huawei, conducted another, progressively more sophisticated CFIUS probe, against the new FINSA 2007 law. This time a takeover where they are not only a minority ownership interest, leveraging what they learned previously with Exon-Florio, yet now adding a new component and/or diversionary/masking twist this time, hiding behind a respected, U.S. majority interest holder (front). In this case Bain Capital Partners.

Again the reactionary rhetoric is “well, we (Chinese government – Huawei) are not taking a controlling interest, so you (CFIUS) should have no issue”. That’s technically true (i.e. no controlling interest) but it masks what they really want and seek to secure. It is NOT 3Com control, revenues or market share, but rather “3Com technology and expertise” – specifically, 3Com’s Tipping Point subsidiary/technology (R&D). See “Commulism Series” on this latest example of “carrot for expertise “ strategy.

The “carrot” here being access to the Chinese market for 3Com/Bain. The “expertise” being Tipping Point R&D.

Tactically, being twofold – both Defensive and Offensive.

Huawei’s (and defacto Chinese government/espionage agencies - PLA) keen interest in 3Com’s internet “intrusion protection technology” (Tipping Point subsidiary), which some may refer to as “anti-hacking” technology. And one would logically then extrapolate and conclude that anything, technology and/or expertise, that is world class at anti-hacking must first be as good or better in what it tries to counter – i.e. intrusion or “hacking” technology.

A case then that the 3Com Tipping Point “Intrusion Prevention System (IPS)” technology provides China a 1-2 punch.

Defensively, it helps combat hacking and external disrupting of its citizen internet blockade technology/firewall, aka Golden Shield.

Recall in the “Commulism Series” Part 4 - Social Order pillar, perhaps the biggest threat to the Chinese government from within is the internet and synchronous social networking vis-à-vis cell phones. Thus the development and installation of the internet barricade firewall - Golden Shield. However, there is a constant cat and mouse battle going on to defeat hackers and their evolving “barricade blocking software”. Tipping Point provides desperately needed countering technology – 3 COM’s anti-hacking (intrusion prevention) technology.

Offensively, as respects intelligence gathering and cyber attacks against other government and/or corporate networks, it can help create improved hacking technology (i.e. “anti-firewall”) for espionage etc operations into sensitive U.S. government (e.g. Pentagon, etc.) and/or private/public sector installations (technology and academic).

Huawei knows that this (anti-hacking) technology is being used by the Pentagon, and other U.S. agencies.

 1  |  2  |  3  |  4  |  5  |  6